Abstract

Small and medium-sized businesses are important sources of employment and value generation; hence they are essential to Sri Lankans' way of life. It shows that SME sector is not providing the expected results and lack in innovation. Thus, there is a burning need to identify drivers to galvanize sector’s innovation capacity and business performance. Through a literature survey researcher defined the concepts ICT-usage, Innovation, EO and possible relationships. Questionnaire was devised based on literature and expert advice to find the relationship between ICT-usage and Innovations moderated by EO. Further research measures the level of ICT-usage among SMEs in Western province, Sri Lanka. This study used quantitative techniques. The population of the study was the SMEs with less than 500 employees in the Western Province. Sample frame was derived from the three main listings of organizations: Ceylon Chamber of Commerce and Ministry of Industries and Industrial Development Board. Accordingly, 350 respondents were selected by using simple random sampling method. Data was analyzed using SPSS and SMART-PLS using SEM modeling. Empirical findings proved the relationships between ICT-usage to SMEs innovations and EOs moderation effect. 
This study identified four main innovations namely: product, process, market and organizational and found that there is a significant effect of ICT-usage on SMEs innovations positively moderated by Entrepreneurial Orientation. Future research could be undertaken to examine the mediating effect of ICT-based innovations on ICT-usage to business performance.